An argument against license enforcement

7 12 2009

This may seem weird as I’ve been talking about pricing and license metric development.  However, we have not yet talked about enforcement. 

To software companies, license enforcement protects the bottom line.  It prevents rampant, “entrepreneurial” software distribution throughout their customer base.  Keep in mind that this discussion isn’t a one-size-fits-all scenario.  A major enterprise software provider may choose to enforce a license differently than a single-user shrink-wrapped software provider.

To customers, software licensing is a way of steering clear of the legal issues surrounding "viral license expansion” that can happen as co-workers share their productivity practices. 

It’s simply risk avoidance – policy triumphing over value to the organization.  IT departments go through elaborate means to “control the desktop environment” of their employees both for ease of management and for license enforcement.

Viral license expansion for fun and profit

If we take away the legal and negative revenue implications of letting a software package roam free-range style throughout an organization, the result of getting more eyeballs on your product can be compelling to both parties.  This is especially true if your software has an entrenched user base in one specialized area of a company, but could bring significant value to other areas of your customer base.

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When Licensing Metrics Must Change

5 11 2009

Everyone knows that technology changes quickly.  So it’s surprising (at least to me) that licensing metrics for software are so difficult to change.  Purchasing contracts, license agreements, and license enforcement tend to lag technical milestones.  Sometimes this is a good thing – for instance, everyone waited out the predicted move to 64-bit servers during the development of the Itanium processor.  At other times, licensing metrics are not compatible with IT practices that develop due to technology – you license per-Ethernet port and they buy per-device.

Consumer packaged goods don’t usually have to keep pace with technical changes.  Cars are licensed per unit, not per cylinder, seat, or window.  In many ways software is licensed “per cylinder” which makes it susceptible to fundamental changes.  Think of the impact hybrid technology or turbo chargers would have on a per-cylinder vehicle licensing model during the current green movement.

What to disrupt when you’re disrupted

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Web sites vs. beer – guess who wins?

24 09 2009

It’s time for an update.  Vacations and a flurry of event activity has gobbled up most of my time recently.  And that’s a good thing!  Further pricing discussion will wait another few days while I write about the launch of a new idea that’s been hatching over the past few months.

SAP for Utilities 2009

This is a top-notch event.  This year I was lucky enough to be involved in the mechanics of a new extension of the event itself – a new, utility-centric collaboration and social networking community.  The event’s theme was “Collaboration Fuels Innovation”.  More specifically – cross-company collaboration. Nobody has to reinvent the wheel or solve the same problem twice if they work on common problems.

The event itself draws a very high level audience.  At the event itself, CxO’s, chief architects, and anyone involved in creating the next generation (pun intended) utility company all rub shoulders and share stories.

Utility companies (generation, transmission and distribution, retailers, and operators of all types) show up to talk about their plans for working with new demands in the marketplace as well as any new governmental mandates.

Our objective was to keep those conversations going beyond the event.  So, we created the UtilityCollaboration community.  The idea was first envisioned by the event organizer, Eventure Events.  I just helped figure out how to do it with them.

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Pricing topics round up

26 08 2009

It’s time to look back at the ground we’ve covered in order to establish the road ahead.  In a series of strategy posts, I talked about the fact that if you don’t know where you’re going, any road will get you there.  I also said it was important to have a sense of purpose and continue to review the goals that you started with in order to see if they’ve changed.

Let’s review what has been covered so that readers can easily catch up with anything they’ve missed and also to plot the next post.

Human behavior

It’s only natural to look for the best deal.  That’s exactly what happens when you get down to brass tacks with any business negotiation.  Humans treat everything with lots of variables as a game.  We like to play with graphic equalizers because we think we can make our music sound better when we have a greater degree of control over the gain of each frequency band.

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Pricing metrics and the customers that suboptimize them

6 08 2009

There are many truths in life.  If it didn’t sound so geeky and pessimistic, I would add to the list “customers will always suboptimize your product based on your metrics.”  It’s not very catchy.

I previously wrote about points to consider when choosing your metrics.  It was by no means exhaustive, but it did have a “salesy focus”.  That’s because your sales people play a vital role in your pricing and licensing scheme both before it is rolled out and when their boots hit the ground (and I saved one harsh reality for the end of this post).

Additionally, I brought up a few “rules” (or at least observations I’ve discovered) about choosing your metrics.  I could have added suboptimization to the list, but I’ve found there are some finer points to consider about this psychological pattern when it comes to your software’s sales, adoption, deployment, and expansion.

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Pricing and the metrics that matter

31 07 2009

Previously, we engaged the topic of the metrics you might choose as the basis of your pricing and how the evolution of technology will disrupt your well-laid plans.  This is especially true in software and hardware, but can also be found in other areas such as telecommunication or Internet services.

Businesses tend to manage new technology or legislation very closely.  Executive positions and departments rise up around a new technology and then get re-focused as that technology is commoditized.  Think about what “IT” means today vs. 20 years ago.  It might have been called IS, MIS, or “Information Systems” back then.  The role of IT used to pertain to mainframes, networking etc. but has grown to encompass cell phones, voice over IP services, laptop support, managed software deployments, cybersecurity etc.

The government can create new positions involuntarily within a business as well.  There are now “Chief Compliance Officers” (i.e. “guy in charge of going to jail”).  But, as these roles become more habitual and the variability or costs become reduced, these roles in an organization can shift or dissolve.

Licensing metrics: Rules Patterns

This is a set of observations I’ve collected over the years in studying and theorizing about what metrics to use for software pricing and licensing.  The only thing that can help deal with technological or market evolution is have a plan around changing your licensing scheme.  When you have those discussions, keeping these things in mind may help.  Here we go:

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Human nature and software pricing (#1)

10 06 2009

For over seven years, it was my responsibility to price a complex software product.  I didn’t expect it to be a place to learn about the psychological interplay of rules and human relationships.

Over the next several posts, I will share what I’ve learned empirically.  No, there is no pricing magic wand.  However, if you’ve searched the product management literature and the Internet, you’ll find that very few people have discussed pricing anything more complex than single user software licenses or golf balls.

So let’s begin.

Pricing jujitsu and your evil twin

The customer is not your adversary.  Yes, you are trying to extract money from their wallet.  But your job is to quantify the value of your product so your sales force and customers can come to a long-term, mutually beneficial agreement.

This is why complex software never gets sold for list price.

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